EMERGING MARKETS-Chile’s peso outperforms Latam FX, Brazil’s real skids 1%


By Sagarika Jaisinghani

Sept 28 (Reuters)The Chilean peso firmed on Monday as President Sebastian Pinera launched a $2 billion fiscal aid program, while the Brazilian real tumbled 1% to extend a three-week losing streak.

A basket of regional currencies .MILA00000CUS was down 0.3% against a weaker dollar. Chile’s peso CLP= firmed 0.3% after Pinera said on Sunday the subsidies would be aimed at creating new jobs or recovering those lost during months of coronavirus-driven lockdowns. FRX/

The currency has recovered sharply from its March lows, but remains about 4% down on the year as the pandemic hammered Chile’s commerce, services and tourism sectors and drove unemployment to over 13%, its highest level in a decade.

The peso, however, has far outperformed Brazil’s real BRBY, which plumbed new lows in 2020 despite a constitutional reform bill aimed at simplifying and reducing the cost of the public sector of Latin America’s biggest economy.

The real fell 1.2% on Monday. Analysts at JPMorgan said the currency could outperform its peers “even if (constitutional reform) approvals take longer than some expect.”

“That said, the recent sell-off in risky assets amid increasing volatility and the fact that BRL is a high beta to these sort of events makes us wary and we stay neutral for the time being,” said JPMorgan strategist Saad Siddiqui.

The Mexican peso MXN= slipped 0.9% in its second straight day of declines even as the unemployment rate eased slightly to 5.2% in August from 5.4% in July. Last week, the central bank lowered interest rates for the eleventh time since August 2019.

“August data will start to make more apparent that the pace of economic recovery will be slow,” said Alonso Cervera, managing director of emerging markets economics research at Credit Suisse.

“We will be watchful of imports’ performance as we project domestic consumption and investment will take longer to improve than external demand.”

The Argentinian peso ARS= eased another 0.8% to hover at record lows with companies struggling to keep up with payments on dollar debt, hiking the risk of a wave of corporate defaults after the central bank tightened access to foreign currency to stem a sharp decline in reserves.

Last week, the FTSE Russell downgraded Argentina’s stock market to “unclassified” from “frontier market” because of capital controls remaining in place. On Monday, the stock index .MERV was up 0.4%, on course to gain for a fifth straight session.

Bourses in Mexico .MXX and Chile .SPIPSA added 1.1% and 0.6%, respectively. MSCI’s index of Latin American equities .MILA00000PUS shed 0.3%.

Latin American stock indexes and currencies:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

1070.60

1.09

MSCI LatAm .MILA00000PUS

1846.10

-0.29

Brazil Bovespa .BVSP

96964.49

-0.04

Mexico IPC .MXX

36969.48

1.05

Chile SPIPSA .SPIPSA

3610.46

0.6

Argentina MerVal .MERV

42141.67

0.236

Colombia Colcap .COLCAP

1176.61

0.45

Currencies

Latest

Daily % change

Brazil real BRBY

5.6186

-1.17

Mexico peso MXN=D2

22.5540

-0.95

Chile peso CLP=CL

784.5

0.32

Colombia peso COP=

3871.46

0.35

Peru sol PEN=PE

3.5887

-0.08

Argentina peso (interbank) ARS=RASL

76.0500

-0.26

(Reporting by Sagarika Jaisinghani in Bengaluru; additional reporting by Luana Maria Benedito; editing by Grant McCool)

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